Should I buy norsk hydro shares?

Given the current circumstances, it may not be a prudent decision to buy Norsk Hydro ASA (NHYDY) shares. Here's why:

1. Financial Performance and Growth Concerns:
   • Norsk Hydro has reported a strong EBITA of NOK 7.4 billion for the third quarter, with a free cash flow generation of NOK 1.7 billion. However, this positive performance is partly offset by:
   • Continued pressure on downstream activities, particularly in recycling and extrusions, due to weaker core markets.
   • Negative impact from increased raw material costs, especially aluminum, which is expected to continue into the next quarter.
   • Fixed costs are expected to increase in the fourth quarter due to postponed spending and seasonally higher maintenance costs.
2. Market Challenges and Strategic Responses:
   • The company is facing a challenging market for battery materials, leading to a reduction in ownership in Viana and no further capital allocation.
   • Recycling margins are under pressure due to low scrap availability and high scrap prices, impacting profitability.
   • Norsk Hydro is progressing on its renewable energy ambitions, with the Illvatn pump storage project passing the investment decision, and the Olen to fuel switch project nearing completion, expected to yield substantial cost savings and carbon emission reductions.
3. Shareholder Returns and Valuation:
   • Norsk Hydro has seen an 11.11% return on investment (RoR) since the last update, outperforming the index return of 10.94%, despite significant market volatility. This suggests a reasonable performance given the market conditions.
   • The company's focus on green initiatives, such as Hydro Rein and Hydro CIRCAL, positions it well for the sustainable transition and decarbonization trends.
   • However, the stock is fairly highly valued with a price-to-earnings ratio of 44.57, a price-to-earnings-growth ratio of 0.23, and a beta of 1.53. This indicates that the stock may not be attractive for investors looking for low valuations.
4. Dividend and Shareholder Returns:
   • Norsk Hydro has a dividend yield of 0.14% as of October 25, 2024, which is modest.
   • The company has a history of dividend payments, but the dividend growth duration is 0 years, and the continuous dividend duration is 4 years, suggesting that while the company pays dividends, there may not be a consistent increase in the payout.
5. Analyst Ratings and Price Targets:
   • Norsk Hydro has been upgraded by Barclays to a "strong-buy" rating, which could be a positive signal for potential investors.
   • However, the average price target and consensus rating are not available as of the latest data, which makes it difficult to gauge the market's sentiment towards the stock.

In conclusion, while Norsk Hydro ASA has shown strong upstream results and is making strides in renewable energy, the challenges in downstream activities and the high valuation may deter some investors. The decision to buy NHYDY shares should be based on your investment strategy, risk tolerance, and the potential for Norsk Hydro to navigate the current market challenges successfully.